Ex-Goldman Sachs banker tries the Kickstarter life

As a former Goldman Sachs investment banker turned entrepreneur, it seemed only natural that I would also take a stab at being a successful angel investor. After all, what do I know?

I love meeting entrepreneurs and learning from them, and a model in which entrepreneurs invest in other entrepreneurs can provide a leg up. I've come to believe that there are two factors that will likely have a huge impact on your ability to successfully invest: timing and access, or relationships. These may seem obvious, but I think a lot of people get enamored with other metrics and ways of judging an investment without realizing that these are probably among the biggest precursors to success.

As I transitioned away from Wall Street, I saw these success factors in action in a somewhat unexpected entrepreneurial market: I got in on the ground floor of the crowdfunding movement. I have participated as a crowdfunder on many of the bigger platforms and know countless entrepreneurs whose products/services have raised funds through these sites.

Since crowdfunding is relatively new, there isn't really a "rule book," but here are four interesting things I have learned while pursuing crowdfunding investments.

1. You may end up with much more than a workout T-shirt.

Most people familiar with crowdfunding basics know that there are a few basic types of investments one can make when crowdfunding: equity or rewards (or as I once heard it defined, ownership vs. T-shirts).

Some opportunities involve equity ownership in the company, and others offer products/service perks-a cool T-shirt, preordering the product for a discount, limited-edition items, etc). Decide what's right for you, and realize that just because it's in the T-shirt category, it doesn't mean it doesn't have value and can't appreciate, although the rewards generally come in the form of smaller checks to write.

For me, since the objective goes a bit deeper in that I always like to have a few side projects that I'm involved in beyond my day job to keep things interesting and keep learning, crowdfunding led indirectly to a major role with an up-and-coming company.

In addition to running my own spirits company, I sit on boards and am always networking. What I hadn't anticipated was finding a major new project via crowdfunding. I discovered a great new sports apparel brand targeting the cross-functional/cross-fit market called Hylete (short for "hybrid athlete") through a crowdfunding platform. After making an investment and getting to know the company better, I saw a huge opportunity (I worked on Under Armour's IPO when I was at Goldman Sachs and see some similarities). I recently joined the company's board.

2. You really should go with what you know.

I've noticed a funny thing about crowdfunding. Since it's a crowd, people tend to jump on deals that seem fun, interesting or high-profile but that are out of their expertise and comfort zone. This is fine if you're doing it for non-capitalist reasons, but if your intention is to generate a return on your investment, stick to whatever principles inform your day-to-day investing.

In my case, that means consumer products and technology, given that's my background. Sticking to what I know means that I usually know someone, or can triangulate someone, involved in the deal. That gives me an added layer of comfort. My favorite source for consumer leads is CircleUp, and for tech opportunities it's AngelList.

3. The next 'Netflix for ...' and 'Uber of ...' are likely to go bust.

The herd mentality manifests itself in two distinct ways in crowdfunding.

I've heard people say, "Oh, so and so is in the deal, so it must be good," and at the other end of the spectrum, I've heard people say, "Oh, if it's on X website, it can't be a good deal and must have been shopped around." I don't believe either of these to be true.

I've seen deals that debuted on crowdfunding platforms and have gone on to do exceedingly well, and I have also seen people think it's a "can't miss" opportunity just because a well-known angel (especially in the tech space) is in the deal. This may seem obvious, but do your due diligence.

Without naming names, I recently had a friend tell me, "I went $50,000 into X tech deal thinking it was going to be a home run because (insert well-known name here) was in it and he thought that the proposition of being 'the Netflix for baby clothes' made a lot of sense."

The company folded in less than a year. Don't be swayed by a catchy line. And "the Netflix for ..." is almost old school. Everyone wants to be "the Uber of ..." these days.

4. Crowdfunding is cool, but it won't make boring paperwork obsolete.

There are people much smarter than I am who have written at length about the JOBS Act and the trickle-down impact it will or won't have on the economy and investing. You don't have to know much to know that this is an important topic on the radar across a spectrum of business interests active on Capitol Hill: entrepreneurship, job creation and the private sector, broadly. Also, compared to non-crowdfunded investments I've made, investments made through crowdfunding have usually required an extra layer of paperwork. It's by no means onerous, but if you're someone who finds this kind of administrative work tedious, just be aware.

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